Call For Transparency in Extractive Industry Revenues

A recent study looks into revenue discrepancies in Cambodia’s extractive industries, where data is either contradictory or limited. It offered three recommendations that focus on transparency as means of accountability to the public
People shop for gold in a shop in Phnom Penh, August 10, 2022. Kiripost/Siv Channa
People shop for gold in a shop in Phnom Penh, August 10, 2022. Kiripost/Siv Channa

The role Cambodia’s extractive industries plays in economic contribution is apparently expanding, albeit slowly, amid uncertainty in relation to the revenue it generates, a study by scholars of La Folette School of Public Affairs revealed.

It mentioned that small-scale, local, and artisanal mining has long since been part of Cambodian culture but in the last few decades, some large-scale mining projects from domestic and international corporations have taken hold in the country.

Back in 2013, it quoted an official report that identified the mining areas which had yet to be fully explored or exploited in Cambodia.

These comprised metallic minerals (gold, iron and tin), non-metallic/industrial minerals (silica sand and limestone), gemstones and ornamental stones (sapphire, ruby and amethyst), solid fuel minerals (coal and lignite) and construction materials (granite, sandstone, gravel, clay and sand).

However, the study noted that the industry is still relatively small. “Mining revenue accounts for only about .013 percent of Cambodia’s gross domestic product as of 2021 while oil rents account for about 0.158 percent of GDP.”

The study mentioned that Cambodia has developed a regulatory framework for extractive industries but has maintained “some level of opacity” around important aspects such as production levels and revenue collections.

“It is quite difficult for NGOs and current or potential investors, let alone average citizens, to gauge how the sector is developing with the current practices.

“Increased government transparency has been shown to have many benefits, including higher economic efficiency and growth, less corruption, and the heightened ability for citizens to hold officials accountable,” it said.

ODC website

Based on information shared by Open Development Cambodia (ODC), a Phnom Penh-based non-governmental organisation, the study analysed four questions and made three recommendations.

It called for improvements to the Mines and Energy Ministry’s website, clarifications of various aspects of the extractive concessions process and for Cambodia to join and comply with the Extractive Industries Transparency Initiative (EITI).

The study by Mathew Attipetty, Lucas Knight, Jennifer Morzfeld, and Phelan Simkus of University of Wisconsin-Madison in the US was conducted for ODC.

The NGO serves to increase government and corporate transparency by collecting data regarding Cambodia’s development and making it accessible to the public.

The ODC website is home to a collection of news, maps and statistics for Cambodia’s economic, environmental and health sectors and other fields.

The study detailed the role of the extractive industries globally and in Cambodia, and traced the development of the oil and gas, and mineral industries.

It also briefly discussed the role of transparency in the extractive industries internationally, with particular emphasis on the EITI using Indonesia, which became part of EITI in 2010.

The study analysed prominent revenue streams from extractive industries and outlined a potential revenue estimation process, gathering information that would be necessary to estimate non-tax revenues from these industries.

Data discrepancy

Pursuant to that, the authors tried to estimate non-tax revenue streams for the mining industry such as surface rental rates, licensing fees and royalty payments, though in many cases they were “limited by data availability or quality issues”.

“Broadly, we find that while reported non-tax revenues in 2021 represent a potentially plausible level — given the current state of data we were able to locate related to the Cambodian mineral industries — it is difficult to precisely verify reported revenues.

“Thus, the large range of our approximations is reflective of data transparency progress that will be necessary to confidently assess whether the Cambodian government is collecting the amount of revenue that they report,” the study stated.

It cited data discrepancies in royalty collection for sand mining activities collated by ODC from news reports and the US Geological Survey (USGS), as well as minimum and maximum revenues based on non-governmental estimates.

In that, the authors highlighted the continuous challenge of obtaining information, noting that improving transparency in Cambodia’s extractive industries is “critical for sustainable and equitable development”.

Three recommendations

Pointing out that its recommendations address a different area of governance, the study stated that the practices can be implemented separately or “ideally” holistically.

"I’m calling for MME website’s improvement", the authors mentioned that relevant extractive industries documentation should be more widely available to the public. “Because we consistently experienced a need to turn to non-governmental sources for documentation, we hope that this recommendation will help align the MME with Cambodia’s Digital Government Policy of 2022–2035.

“Improving transparency through administrative governance is also a crucial mechanism for informing the public about the environmental and social impacts of extractive industries and what the government is doing to address these issues,” they said.

Calling for more transparency, its second suggestion is aimed at legislative governance practices and the need to clarify the extractive concessions framework by making contract- and aggregate- level data about licences available in Cambodia.

For example, it said, by releasing active mining licence information and stating the royalty rates that apply for each mining company operating in Cambodia.

“We made this recommendation because much of the data necessary to confidently estimate revenues from extractive industries in Cambodia is either not available or incomplete.

“While this information is likely held by the government, it is not available to the public,” the authors wrote.

Its third recommendation urged Cambodia to join EITI and become compliant with the EITI standard, so that NGOs like ODC can push for tangible changes to governance practices that promote openness and transparency in the extractive industries and more broadly.